Superannuation Industry Stewardship Group key messages 19 May 2022

Superannuation regulators update

Australian Securities and Investments Commission

Australian Securities and Investments Commission (ASIC) noted the following releases:

• superannuation forecasts relief, Consultation Paper 351 Superannuation forecasts: Update to relief and guidance (CP 351)
• report on findings from a review of trustees’ underperformance communications
• breach reporting – ASIC determining what additional guidance is required and will liaise with the Superannuation Industry Stewardship Group members offline
• sunsetting relief, Consultation Paper 358 Remaking ASIC relief on PDSs, superannuation dashboards and FSGs (CP 358) – anticipated by the end of June 2022.

Australian Prudential Regulation Authority

Work to administer the annual performance test in 2022 is well advanced.

The Australian Prudential Regulation Authority (APRA) has been engaging with the trustees of products of greatest concern in the 2021 Choice product heatmap to identify planned remediation actions and timeframes involved. APRA is following up with trustees where responses to engagements have not been sufficient.

APRA’s Prudential Standard SPS 515 Strategic Planning and Member Outcome has been flagged for review.

As part of the retirement income covenant, APRA has released a joint letter with ASIC advising that all registrable superannuation entity licensees are required to formulate a retirement income strategy by 1 July 2022.

APRA is planning to issue a letter in June following consultation around Prudential Standard SPS 310 Audit and Related Matters. APRA will defer release of implementation until next year. APRA is looking to issue the finalised Prudential Standard SPS 530 Investment Governance as soon as possible and is currently working through feedback on calls for guidance.

Consultation on contingency and recovery planning has now closed and APRA is working through the feedback.

Australian Financial Complaints Authority

A large number of super complaints are going straight to the Australian Financial Complaints Authority (AFCA) without going to the trustee first. It is anticipated that a third of these complaints could be resolved if the trustee was approached in the first instance. Approximately 10 to 11% of complaints are going all the way through the process to an adjudicator or ombudsman. The majority of decisions are in favour of the trustee.

AFCA is:

• continuing to work through recommendationsExternal Link of the AFCA Independent ReviewExternal Link
• reviewing feedback on the AFCA funding model consultationExternal Link with a view to revise the model (fee model versus levy model) and implement by 1 July 2022
• working through older cases with the aim to close as many cases as possible by 1 July 2022
• aiming to finalise consultation on the super fees and charges model soon.

AFCA’s top 5 complaints continue to be super account issues, total and permanent disability, income protection, death benefits and pensions.

A member queried the basis of fees for unresolved complaints as at 1 July 2022. APRA confirmed that fees are charged at the point when the complaint is closed on the AFCA system.

ATO

From 1 April 2022, parties in family law matters can approach the Federal Circuit and Family Court of Australia to obtain information of a party’s superannuation interest from the ATO.

The Australian National Audit Office (ANAO) released its report on Addressing Superannuation Guarantee Non-ComplianceExternal Link at the end of April 2022. The ANAO report supports the ATO’s adoption of more preventative and proactive approaches to improve superannuation guarantee (SG) compliance, with a key recommendation that the ATO should increase the use of enforcement and debt recovery powers.

Australia Post has now been onboarded as an approved self-managed super fund (SMSF) message provider which enable SMSFs to meet requirements of the SuperStream data standards.

Member comments

• How is the ATO progressing on the comparison tool for choice products? Treasury advised that at this stage the tool is only approved for MySuper products. It is a matter for government to decide if they extend it to include choice products.
• Is the ATO proposing any change to basis for remission of penalties under Law Administration Practice Statement PSLA 2021/3 Remission of additional superannuation guarantee charge? ATO noted there was no change and the approach outlined aims to strike the right balance between the consideration of an employer’s compliance history and attempts to engage with the ATO. Members agreed and noted they felt it was being applied appropriately by ATO staff.

Your Future, Your Super

Superannuation comparison tool

There has been steady usage of the tool with more than 1.3 million views. We are starting to collect information on the demographics of its use.

The annual performance test data is on target to be uploaded by the end of August. There will be minor updates focused on accessibility, readability, and terminology.

Wholesale stapling solution

A webinar for digital service providers (DSPs) will be conducted on 19 May where providers will be given the specifications and sandpit to test their solutions. Unfortunately, the ATO will not be able to complete testing until later in the year which means the solution will be delayed by a few months.

The stapling service is being used by a broad spectrum of people, tax practitioners, employers, and individuals.

Standard choice form

The form has been revised with feedback being sought from several ATO stewardship groups. Most of the written feedback has been from the superannuation industry.

Two versions of the form have been developed which will be user tested. Changes to the form include a reduced instructional component, simplified terminology, and the use of visuals to aid navigation.

Super measures affecting individuals from 1 July 2022

ATO provided industry with an update on: status of implementation, tools, and communications for changes to the super system from 1 July including:

• The temporary reduction in superannuation minimum drawdown rates introduced in response to the pandemic has been extended for a further year.
• We are updating our eligibility age for downsizer contributions web content to reflect the reduction in age from 65 years old or older to 60 years old or older.
• The removal of the work test for voluntary contributions without the need to meet the work test is a significant change for the industry in that the work test is no longer administered by super funds. This responsibility has shifted to the ATO.
• The SG rate will increase to 10.5% from 10% and the $450 per month threshold has been removed.

Removal of the $450 threshold for SG eligibility

The ATO is working closely with DSPs to make sure payroll software is updated to ensure their clients can correctly calculate SG entitlements from 1 July.

The ATO’s focus is to implement and communicate what the changes mean for impacted stakeholders. Our strategy is broad and encompasses external newsletters, ATO web content updates and consultation with stewardship groups, along with a targeted outbound communication campaign to employers which commences from 23 May 2022.

We are providing a copy of our communications to tax professionals and other professional associations so they can be prepared to respond to questions.

All other SG eligibility rules remain unchanged noting that an employee who is under 18 years old, provided they work more than 30 hours in a week, will be eligible for superannuation, regardless of how much they are paid.

For some employers it will be the first time they have made SG contributions.

Members noted that there is confusion, lack of knowledge about the change, including complexity for contractors, impacts on minors because of the 30  hour rule, and where payment date is after 1 July for work conducted prior to 1 July. ATO has since updated Work out if you have to pay super website guidance.

Non-arm’s length income/expenses

The ATO is aware of the concerns being raised by the industry about non-arm's length income/expenses. We are working with industry to understand the practical impacts and concerns noting that the arrangements are very complex and vary significantly across the sectors.

We maintain the view that the general expenditure issue does not present a significant risk for either SMSF or large APRA funds which would warrant a targeted compliance focus.

Roundtable with the Commissioner of Taxation

The Commissioner of Taxation attended the meeting to hear from members about what is important to them and their clients.

The Commissioner noted:

• the value of the ATO’s stewardship groups in being able to hear about administrative issues that are impacting the various segments
• the benefit of co-chairing arrangements that have been put in place and the engagement of members in these groups
• constraints in ATO resources and the budget pressures being faced by the ATO
• significant increases in system interactions from approximately one billion in June 2019 to 20 billion in June 2020 due to Single Touch Payroll and other changes
• cyber security continues to be a big issue.

The Commissioner noted some of the structural issues in the superannuation legislative framework that limit the ATO’s ability to address some of the known concerns of industry, but these would require policy consideration by government to change.

Members provided their insights on key issues affecting the industry including:

• impact of the non-arm’s length rules
• access to information for financial planners
• non-timely responses to private binding rulings
• openness to SG payments being made at the same time as the wage payment
• the need for affordable options for Australians to get advice on superannuation
• meeting trustee requirements
• the necessity of digital transformation
• impact of fund mergers
• access to superannuation data
• ability to find information on ato.gov.au
• unpaid superannuation
• the litigation outcome for military superannuation impacts are much broader than the military and it is not always the same outcome
• merger of funds – ATO advised that our position is that this is a commutation of the pension even if the member had no choice in the merger.

Members welcomed ATO’s balanced approach to SG penalties.

Attendees

Attendees list

Organisation	Member
ATO	Emma Rosenzweig (Co-chair), Superannuation and Employer Obligations
ATO	Melanie Casey, Superannuation and Employer Obligations
Association of Super Funds Australia	Glen McCrea
Australian Financial Complaints Authority	Heather Gray
Australian Institute of Superannuation Trustees	Eva Scheerlinck
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	Michelle Levy
Link Group	Theresa Mills
Mercer	David Knox (Co-chair)
SMSF Association	Peter Burgess
The Tax Institute	Phil Broderick

Guest attendees

Guest attendees list

Organisation	Attendee
ATO	Chris Jordan, Commissioner of Taxation
ATO	Justin Micale, Superannuation and Employer Obligations
ATO	Kylie White, Superannuation and Employer Obligations
ATO	Nadia Alfonsi, Public Groups and International
ATO	Sonia Corsini, Superannuation and Employer Obligations
Australian Prudential Regulation Authority	Mairead Loughlin
Australian Prudential Regulation Authority	Warren Stanley
Australian Securities and Investments Commission	Alex Purvis
Australian Securities and Investments Commission	Jessica Spence
Super Consumers Australia	Franco Morelli

Apologies

Apologies list

Organisation		Member
ATO	Michelle Allen, Superannuation and Employer Obligations
Australian Prudential Regulation Authority	Carolyn Morris
Australian Prudential Regulation Authority	Katrina Ellis
Australian Securities and Investments Commission	Jane Eccleston
Business Council of Australia	Ben Davies
Super Consumers Australia	Xavier O’Halloran
Treasury		Lynn Kelly

Information about the key topics discussed at the Superannuation Industry Stewardship Group meeting 19 May 2022.