QMV Superannuation Regulatory Update September 2017

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Yet another busy month with five major superannuation reforms introduced to Parliament. The Bills relate to promoting Member Outcomes, Housing Affordability, Independent Directors on Trustee Boards, Complaints or Dispute Resolution, and extending Choice of Fund.
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  • 1. While all care has been taken in the preparation of this information, QMV Solutions takes no responsibility for any loss or damage suffered from relying on this information. This information is not intended to be financial, tax or legal advice. September 2017 |Superannuation IndustryLegal & RegulatoryUpdate QMVsupersmarts advisory | delivery | resources September 2017 In Brief Major Reform Updates Improving Accountability & Member Outcomes 14 September 2017 Legislation Introduced Bills were introduced into Parliament on 14 September 2017 and has been referred to the Senate Economics Legislation Committee for report by 23 October 2017. The Bill creates an obligation on superannuation trustees to consider the appropriateness of their MySuper product offering annually, give APRA an enhanced capacity to refuse a RSE licensee a new authority to offer a MySuper product or to cancel an existing authority, and imposes civil and criminal penalties on directors of RSE licensees who fail to execute their responsibilities to act in the best interests of members. The Bill also allows APRA to obtain information on expenses incurred by RSE in managing or operating the fund, and requires RSE licensees to hold annual members’ meetings. QMV recommends that RSE licensees should remain attentive to the progress of the Bill, and consider establishing robust monitoring and reporting for MySuper products on key member outcome and value proposition criteria. Housing Related Superannuation Measures 7 September 2017 Legislation Introduced Bills were introduced into Parliament on 7 September 2017 to establish the First Home Super Saver Scheme (FHSSS) and to allow older Australians to contribute some of the proceeds of the sale of their family home to the superannuation system. While it has been estimated that participation in either scheme is likely to be low, RSE Licensees will be required to comply with the changes related to both schemes if passed into law. QMV recommends that Trustees liaise with administration and technology service providers (or business units) to ensure that planning for the implementation of the changes to systems and processes has been considered. 🔗Link to Details 1 🔗Link to Details 2 Yet another busy month with five major superannuation reforms introduced to Parliament in September. The Bills relate to promoting Member Outcomes, Housing Affordability, Independent Directors on Trustee Boards, Complaints or Dispute Resolution, and extending Choice of Fund. There were also a handful of technical amendments, including finally closing a loophole in SG laws which allowed salary sacrifice to reduce mandatory employer contributions.
  • 2. September 2017 |Pension & Superannuation RegulatoryUpdate advisory | delivery | resources While all care has been taken in the preparation of this information, QMV Solutions takes no responsibility for any loss or damage suffered from relying on this information. This information is not intended to be financial, tax or legal advice. Trustee Governance Arrangements 14 September 2017 Legislation Introduced Bills were introduced into Parliament on 14 September 2017 to implement new trustee arrangements requiring RSE licensees to have at least one- third independent directors, for the Chair to be an independent director, and for any related Prudential Standards to be complied with. Interestingly, the Bill would also remove equal representation requirement for the remaining two thirds of the Board for standard employer-sponsored funds. The Bill is consistent with the Bill introduced to the previous Parliament that was not passed before Parliament was prorogued, and there remains some uncertainty as to the likelihood of passing into law in the current form. QMV recommends that RSE Licensees (particularly of standard employer-sponsored funds) remain attentive to developments. There will be a transition period if the Bill passes during which time Trustees may need to make changes to the Board composition, policies and procedures, Company Constitution and Trust Deed. Financial Complaints & Dispute Resolution 14 September 2017 Legislation Introduced The Bill introduced to Parliament would create a new external dispute resolution framework and an enhanced internal dispute resolution framework for the financial system, including superannuation funds. The Bill would establish the Australian Financial Complaints Authority (AFCA) for all new financial disputes, including superannuation disputes from 1 July 2018. Consumers will have the option to transfer complaints made prior to 1 July 2018 to AFCA. AFS and RSE licensees will be required to apply for membership. The Bill also repeals the Superannuation (Resolution of Complaints) Act 1993, replacing existing internal complaint handling requirements with an enhanced Internal Dispute Resolution (IDR) framework, consisting of procedures and reporting. QMV recommends that RSE Licensees remain attentive to developments, particularly concerning transition between the existing and current schemes, and any requirements to apply for membership. Trustees should also include the implementation of the changes in strategic planning. Choice of fund 15 September 2017 Legislation Introduced The Bill would amend the SG Act to enable employees to choose their own superannuation fund where they are employed under a work place determination or enterprise agreement that is made on or after 1 July 2018. The changes will impact new employees only, with default arrangements in place for existing employees unless they elect to exercise choice of fund. The Bill also ensures that the superannuation guarantee shortfall amount does not increase for employers where an employee is a member of a defined benefit scheme with a maximum benefit entitlement. QMV recommends that Trustees of standard employer sponsored funds (and defined benefit schemes in particular) remain attentive to the changes. As the changes may impact net member flows and contribution levels, strategic planning activities should include consideration on the impact of the changes. 🔗Link to Details 3 🔗Link to Details 4 🔗Link to Details 5
  • 3. September 2017 |Pension & Superannuation RegulatoryUpdate advisory | delivery | resources While all care has been taken in the preparation of this information, QMV Solutions takes no responsibility for any loss or damage suffered from relying on this information. This information is not intended to be financial, tax or legal advice. Technical Changes & Updates Portfolio Holdings Disclosure 14 September 2017 Legislation Introduced The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No 1) Bill 2017 would amend the Corporations Act 2001 to refine the requirements for RSE licensees to make publicly available their portfolio holdings. The refinements will remove the obligation to include information about financial products, or other property that non-associated entities have directly invested in; and the reporting obligations on parties to contracts and arrangements that acquire a financial product using the assets, or assets derived from assets, of an RSE. If the Bill passes, this measure will take effect on 31 December 2018. QMV recommends that Trustees review Portfolio Holdings Disclosure procedures, and related agreements with custodians or investment managers to ensure that the required information is available and disclosed. Salary Sacrifice & SG Shortfall Loophole 15 September 2017 Legislation Introduced The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No 2) Bill 2017 was introduced into Parliament on 15 September to close a loophole which allowed salary sacrifice deductions to reduce mandatory employer contributions. The Bill would ensure that an individual’s salary sacrifice contributions cannot be used to reduce an employer’s minimum superannuation guarantee contributions. These amendments would apply in relation to working out an employer’s superannuation guarantee shortfall for quarters beginning on or after 1 July 2018. This measure is unlikely to have a significant impact on the administration of superannuation funds, however may be relevant to ensure client facing and advice representatives understand the change. Tax File Number Use 20 September 2017 Legislative Instrument Made APRA has remade a legislative instrument regulating the way in which superannuation entities may request tax file numbers from beneficiaries, and the information which must be provide. The instrument also prescribes text to be utilised by superannuation trustees in requesting tax file numbers. Superannuation trustees should ensure that existing processes and member service functions are handling tax file numbers in a manner consistent with the instrument. Recordings and scripts containing the prescribed text should be reviewed to ensure compliance. 🔗Link to Details 6 🔗Link to Details 7 🔗Link to Details 8
  • 4. September 2017 |Pension & Superannuation RegulatoryUpdate advisory | delivery | resources While all care has been taken in the preparation of this information, QMV Solutions takes no responsibility for any loss or damage suffered from relying on this information. This information is not intended to be financial, tax or legal advice. Transfer Balance Cap Reporting 27 September 2017 Legislative Instrument Made A legislative instrument has been made determining that transfer balance account reports are to be lodged by superannuation providers and life insurance companies no later than 10 business days after the end of the month. The instrument applies from 1 October 2017. QMV recommends that superannuation trustees who are required to report transfer balance account reports ensure that the reports are lodged within the required timeframe. Policy & Guidance Transfer Balance Cap & Total Super Balance 27 September 2017 Announcement The ATO published draft updates to two Law Companion Guidelines on the related to the transfer balance cap and the total superannuation balance. The proposed amendments to are intended to reflect the new transfer balance credit arising from the repayment of a limited recourse borrowing arrangement, and changes to the treatment of transition to retirement income streams. QMV recommends that superannuation fund trustees review the proposed changes, and provide any comments, questions or concerns to the ATO. More Questions or Need Support? 🔗Link to Details 9 🔗Link to Details 10 QMV partners with superannuation fund trustees and administrators to adapt to changes in the legal and regulatory environment. If you have any questions or need assistance, you can contact me directly at jsteffanoni@qmvsolutions.com Jonathan Steffanoni, Principal Consultant, Legal & Risk
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