By Mark Bland, Partner and Geoffrey McCarthey, Special Counsel
Mills Oakley has developed this new fortnightly update to help trustees of regulated superannuation funds track and manage regulatory change. We look ahead to forthcoming developments, look back at recent changes and then consider the impact on trustees.
- 29 April – APRA data reporting for Early Access applications
- 28 April – Reporting deadline for Modern Slavery Statements delayed by 3 months
- 20 April – Applications to the ATO for early release of super opened
- 14 April – ASIC published COVID-19 financial advice relief and no-action position
The Prime Minister has announced the Commonwealth Parliament will sit for three days, expected to be in the second week of May. The sitting might progress current law reform proposals affecting superannuation, including Royal Commission recommendations.
1 May – for a single person the deeming rates are reduced to 0.25% on the first $51,800 of investment assets plus 2.25% on investment assets over the amount of $51,800. For a couple the deeming rates are reduced to 0.25% on the first $86,200 of combined investment assets, plus 2.25% on investment assets over the amount of $86,200.
30 April – COVID-19 hardship access eligibility varied for holders of temporary work visas in the skilled and shortage categories to include those who are still working but limit access to those who can’t meet immediate living expenses.
29 April – First APRA weekly return from trustees about COVID-19 Early Access applications and payments is due. The reports must include the number and value of early release benefits paid to superannuation members and the processing times of those payments. link to APRA media release
28 April – Government extended the deadline for lodgement of statements under the Modern Slavery Act 2018 (Cth) by 3 months. The stated purpose is to give reporting entities additional time to assess changing modern slavery risks linked to the coronavirus pandemic. Link to release here.
24 April – Australian Border Force released an information sheet on reducing modern slavery risk in the wake of COVID-19.
21 April – ATO was to commence sending determinations under the early release of superannuation scheme to trustees.
20 April – Members were able to apply for 1st COVID-19 hardship access to $10,000 of super if they certify they meet eligibility tests.
16 April – APRA announces case by case relief for application of CPS 234 – Information Security to third party information assets will be available to extend the transitional period for compliance for a further six months until 31 December 2020. Link to APRA media release
14 April – ASIC announced temporary relief measures to assist industry in providing consumers with affordable and timely advice during the COVID-19 pandemic. Advice providers will be required not to give a statement of advice (SOA) to clients when providing advice about early access to superannuation or for existing client when relating to the adverse consequences of COVID 19 on conditions. There is also conditional relief to allow 30 not 5 business days to give an SOA for advice necessitated by the adverse effects of COVID-19. Registered tax agents will be to give advice to existing clients about early access to superannuation without needing to hold an Australian financial services (AFS) licence on conditions. ASIC also published a temporary no-action position for superannuation trustees to avoid doubts about the scope of personal advice that may be provided by, or on behalf of, the superannuation trustee that can be charged to the fund. link to Mills Oakley article.
16 April 2020 – ASIC publishes updated FAQ for trustees to clarify expectations about advice about early access to superannuation. Link to ASIC FAQs
16 April 2020 – APRA publishes updated FAQs for trustees relating to COVID–19 including specifying an expectation of payment of withdrawals under the early access scheme generally within 5 business days of receiving the determination for the ATO. Link to APRA FAQs
14 April 2020 – ASIC publishes updated information about regulatory priorities impacted by COVID-19 including to confirm that there will be a further deferral of portfolio holding disclosure commencement, that there will be a deferral of publication of industry level findings from joint work with APRA on trustee’s oversight of fees and costs, and advise of consideration of extension in mandatory application of RG 97. Link to ASIC notification
9 April – AUSTRAC provides exemption from AML/CTF customer identification procedure for COVID-19 Early access to super where ATO has approved payment. Link to AUSTRAC notification.
1 April 2020 – ASIC & APRA issued a joint letter and FAQs to superannuation trustees on COVID-19. Reminding them about their trustee obligations for dealing with the impacts of COVID-19. The regulators said the challenging circumstances associated with COVID-19 require trustees to make new business arrangements, amend priorities and adjust their short-term investment strategies. What does not change is the duty on trustees to comply with the law, including the duty to act in the best interests of their members. The joint letter can be found here.
Impact on Trustees
Early release – payments & reporting
Reporting the early release super information is expected on a best endeavours basis. However, APRA says the reporting requirement will be implemented by APRA through a legally binding reporting standard if the response from industry does not meet the objectives of the data collection.
Trustees’ legal obligation for payment of early release is “as soon as practicable” however APRA’s FAQ states five business days unless there are red flags or it’s a defined benefit fund. APRA is expected to carefully scrutinise delays in payment. Regardless of legal requirements or issues in ATO providing datafiles to trustees, delay in would be likely create to reputational risk for trustees being criticised for delay which may lead to enhanced scrutiny by APRA.
Early release – member communications
ASIC is expected to carefully scrutinise advertising and public communications to ensure in particular that projections about potential long-term losses from diminishing account balances accord with ASIC’s approach to projections and are balanced.
When communicating with members, trustees need to take care not to be giving personal advice if they are not expecting to meet the personal advice obligations, particularly in call centres. The pre-existing relationship between trustees and members was a determining factor in the Full Federal Court decision in ASIC v Westpac Securities in October 2019, as to whether a reasonable person might expect the trustee to have considered one of the member’s personal circumstances. General advice warnings should be given early and often.
There are risks for trustees providing communications if they are seen as not being balanced in recognising the benefits of early access on which government policy is based, even if the trustees think that for it may be in the best interests of members generally to discourage take up of early access.
The extension on lodging the Modern Slavery Statement will extend the reporting deadline for most funds from 30 December 2020 to 31 March 2021. Importantly, it does not change the reporting period which for most funds will end on 30 June 2020. Trustees should remember that they can only report on what they have done during the reporting period in relation to identifying, assessing and addressing Modern Slavery risks in their supply chain and operations (incl investments). This should include consideration of COVID-19 related risks. There is more to be done on this front, not less.