Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

General outline and financial impact

Your Future, Your Super

Schedule 1 to the Bill amends the SGAA to limit the creation of multiple superannuation accounts for employees who do not choose a superannuation fund when they start a new job.

Schedule 2 to the Bill amends the SIS Act to require APRA to conduct an annual performance test for MySuper products and other products to be specified in regulations (such as 'trustee-directed products' where the trustee has control over the design and implementation of the investment strategy). A trustee providing such products will be required to give notice to its beneficiaries who hold a product that has failed the performance test. Where a product has failed the performance test in two consecutive years, the trustee is prohibited from accepting new beneficiaries into that product. APRA may lift the prohibition if circumstances specified in the regulations are satisfied.

Schedule 3 to the Bill amends the SIS Act to:

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require each trustee of a registrable superannuation entity and each trustee of a SMSF to perform the trustee's duties and exercise the trustee's powers in the best financial interests of the beneficiaries;

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require each director of the corporate trustee of a registrable superannuation entity to perform the director's duties and exercise the director's powers in the best financial interests of the beneficiaries;

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allow regulations to be made that prescribe additional requirements on trustees and directors of trustee companies of registrable superannuation entities where failure to comply with these additional requirements would be a contravention of the best financial interests duty;

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reverse the evidential burden of proof for the best financial interests duty so that the onus is on the trustee of a registrable superannuation entity. The reverse onus does not apply to additional best financial interest duty requirements prescribed by regulations; and

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allow contraventions of record-keeping obligations specified in regulations to be subject to a strict liability offence to provide regulators with an additional option to respond to compliance issues relating to record-keeping requirements.

Schedule 3 to the Bill also amends the Corporations Act to remove an exemption from disclosing information about certain investments under the 'portfolio holdings disclosure' rules.

Date of effect: Schedule 1 applies in relation to an employee's employment where that employment starts on or after 1 July 2021.

Generally, the amendments made by Schedule 2 apply in relation to MySuper products on and after 1 July 2021 and apply in relation to other products specified in the regulations on and after 1 July 2022.

These amendments in Schedule 3 apply from 1 July 2021.

Proposal announced: This Bill partially implements the measure 'Superannuation Reform-Your Future, Your Super' from the 2020-21 Budget.

Financial impact: Together, Schedules 1, 2 and 3 are estimated to have a cost of $46.0 million over the forward estimates period as reported in the 2020-21 Budget measure 'Superannuation Reform':

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights -Chapter 4.

Compliance cost impact: The 'Superannuation Reform-Your Future, Your Super' measure announced in the 2020-21 Budget is estimated to have a total regulatory impact of $5.1 million per year on business.

The Productivity Commission's report, Superannuation: Assessing Efficiency and Competitiveness, has been certified as a process and analysis equivalent to a Regulation Impact Statement for the purposes of the Government decision to implement this measure. The report can be accessed through the Australian Parliament House website. ^[1]