Senate

Supplementary Explanatory Memorandum relating to sheet PM122

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

Chapter 1 - Amendments to the Treasury Laws Amendment (Your Future, Your Super) Bill 2021

Outline of chapter

1.1 This Chapter explains the amendments to the Bill.

Summary of new law

1.2 The amendments to the Bill delay the start date of Schedule 1 to the Bill, so that the single default account amendments apply in relation to employees who commence employment on or after 1 November 2021. The amendments to the Bill also make technical corrections to Schedules 2 and 3 to the Bill.

Comparison of key features of new law and current law

Detailed explanation of new law

Schedule 1 - Application of the single default account amendments

1.3 Schedule 1 to the Bill sets out the single default account amendments, which limit the creation of multiple superannuation accounts for employees who do not choose a superannuation fund when they start a new job. The single default account amendments currently apply to an employee's employment where that employment starts on or after 1 July 2021.

1.4 Amendments 1, 2 and 3 delay this application date so that the single default account amendments apply to an employee's employment where that employment starts on or after 1 November 2021.

1.5 Arrangements for employees who are employed by their employer before 1 November 2021 are therefore not affected by the changes in Schedule 1 to the Bill.

1.6 Delaying the application date to 1 November 2021 aligns the application of the single default account amendments with the notice of the outcomes of the first annual performance test for MySuper products.

1.7 The amendments in Schedule 2 to the Bill require APRA to determine whether MySuper products have met the performance test for the 2020-21 financial year (and later financial years). The determination for the 2020-21 financial year must be made by APRA and given to trustees within a period, starting after the end of the financial year, worked out under regulations. This period is expected to be by 31 August 2021. If APRA determines that the fund's MySuper product(s) have failed the performance test, the trustee is generally required to notify beneficiaries who hold this MySuper product within 28 days after receiving APRA's determination. Therefore, by 1 November 2021, beneficiaries will generally know if their MySuper product has failed the performance test for the 2020-21 financial year.

1.8 Aligning the start date of the single default account amendments with the notice of the outcome of the first annual performance test for MySuper products will therefore ensure employees are not unknowingly stapled to an underperforming MySuper product.

Schedule 2 - Addressing underperformance in superannuation

1.9 Amendment 4 makes a technical correction to paragraph 60D(1)(a) of the SIS Act in Schedule 2 to the Bill. This amendment clarifies that a requirement that must be met to pass the underperformance test can relate to a specific Part 6A product as prescribed by the regulations.

Schedule 3 - Best financial interests duty

1.10 Amendment 5 makes a technical correction to item 3 of Schedule 3 to the Bill as a consequence of a related amendment made in the House of Representatives.