Super Alert – 1 February 2019

Welcome to the first Super Alert of 2019. We hope you enjoy this edition and those to come throughout the new year.

Human Rights Commission – Sex Discrimination Guidelines

In November 2018, the Australian Human Rights Commission published updated guidelines titled “Guidelines: Special measures under the Sex Discrimination Act 1984 (Cth)” (Guidelines). Although not legally binding, the Guidelines are intended to “provide practical guidance to organisations and individuals to encourage the implementation of special measures” (ie, organisations taking proactive measures to address positive discrimination).

In the chapter concerning permissible positive discrimination, the Guidelines provide an example which sets out how special measures can be implemented “to address the retirement savings gap between men and women”. This includes paying an additional 2% of superannuation for female employees including during any maternity leave. If a business is satisfied “that the special measures are being taken for the purpose of achieving substantive equality, that the special measures proposed will reasonably further this purpose, and are appropriately targeted”, then there is no need to apply to the Australian Human Rights Commission for a certification or exemption.

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SCT determination – incorrect telephone advice given to member

On 29 November 2018, the Superannuation Complaints Tribunal handed down determination D18-19\084 [2018] SCTA 216 regarding telephone advice given to a member.

The member made non-concessional contributions in the three-year period 1 July 2010 to 30 June 2013 which totalled $485,000, being $35,000 over her contribution cap under the three-year ‘bring forward’ rule. She was then liable for $16,275 excess contribution tax.

The member alleged that she made excess contributions because the Trustee provided her with incorrect information during a telephone discussion during December 2012.

The Trustee declined to compensate her for the excess contribution tax because it submitted that in telephone calls with the helpline only general information about contribution caps would have been provided, and would not have turned to the member’s personal situation or contributions that she had already paid to her Fund accounts.

The trustee no longer had access to the recording for the key telephone discussion in December 2012. However, another phone call between the member and the helpline in September 2014 was heard by the Tribunal. It was clear that quite specific information was given to the member relating to her specific situation.

Accordingly, the Tribunal was not satisfied that the Trustee only ever gave the member general advice and considered, on the balance of probabilities, that the Trustee did give the member advice in the telephone call in December 2012 that she could make a further payment of a specific amount which is what took her over her cap.

The Tribunal found that the member relied upon the incorrect information provided by the Trustee to her detriment, and that the loss arising from that advice was caused by the Trustee.

Therefore, the Tribunal set aside the decision of the Trustee and substituted its own decision that the Trustee compromise the member’s claim in the amount of $16,275 plus interest.

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Treasury Laws Amendment Regulations – superannuation income stream benefit definition

On 7 December 2018, the Treasury Laws Amendment (Miscellaneous Amendments) Regulations 2018 were registered on the Federal Register of Legislation.

As part of the “maintenance of the statute book” the Explanatory Statement indicates that the purpose of the Regulations is to amend a range of laws, including in relation to superannuation. Specifically, it makes a retrospective technical amendment to the Income Tax Assessment Regulations 1997 to confirm the meaning of “superannuation income stream benefit” for the purpose of section 307-70 of the Income Tax Assessment Act 1997.

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ASIC – consultation paper on fees and costs disclosure

On 8 January 2019, ASIC released Consultation Paper 308 Review of RG 97 Disclosing fees and costs in PDSs and periodic statements (CP 308) which sets out ASIC’s response to the recommendations set out by Darren McShane in Report 581 Review of ASIC Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements, which was released in July 2018. ASIC has attached a draft RG 97 and draft Schedule 10 in the Corporations Regulations 2001 (Cth) which set out how each of the recommendations will be implemented.

Submissions to CP 308 are due on 2 April 2019.

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Productivity Commission – final report

On 10 January 2019, the Productivity Commission publicly released its report into its inquiry of the superannuation system. It made 31 recommendations, the first two being:

1. “Default superannuation accounts should only be created for members who are new to the workforce or do not already have a superannuation account (and who do not nominate a fund of their own).”
2. “A single ‘best in show’ shortlist of up to 10 superannuation products should be presented to all members who are new to the workforce (or do not have a superannuation account), from which they can choose a product.”

Other key views from the Productivity Commission’s report included:

• “structural flaws – unintended multiple accounts and entrenched underperformers — are harming millions of members”;
• “evidence abounds of excessive and unwarranted fees in the super system”;
• “cost savings from realised scale have not been systematically passed on to members as lower fees or higher returns”; and
• although the “system offers products that meet most members’ needs…members lack simple and salient information and impartial advice to help them find the best products”.

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Case law – McVeigh v REST – application for maximum costs order dismissed

On 17 January 2019, the Federal Court of Australia handed down an interim decision on a procedural question in McVeigh v Retail Employees Superannuation Pty Ltd [2019] FCA 14. The applicant (Mr McVeigh, a member of REST) applied for a maximum costs order under the Federal Court Rules 2011 on the basis that his suit raises questions involving the public interest. Whilst Perram J acknowledged that “[i]t is legitimate to describe the Applicant’s litigation as being of a public interest nature”, the application was declined because the Court was not sufficiently informed about all aspects necessary to make a maximum costs order.

However, this judgement is nevertheless of interest because it provides a summary of the issues likely to be dealt with in the substantive proceeding. The judge noted that “this is a moderately complex case about the duties of superannuation trustees in relation to climate change and their obligation to provide information about the same to members”.

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Full Court of Family Court – appeal concerning defined benefit interest splitting

On 18 January 2019, the Full Court of the Family Court of Australia handed down the decision of Bulow & Bulow [2019] Fam CAFC 3, which was an appeal from a single judge of the Federal Circuit Court of Australia.

The case concerned family law superannuation splitting involving a defined benefit interest held by the husband. The trial judge allocated a base amount of the husband’s superannuation to the wife, but it appears that the complexities of the husband’s public sector defined benefit superannuation interest were not taken into account by the trial judge.

The Full Court held that it is an error “to assume that the effect of a s 90XT(1)(a) [base amount splitting] order upon the husband’s defined benefit interest is the same as it would be if the husband held an accumulation interest” (paragraph 22). Further, the Full Court held that “[t]he fact that particular considerations apply to defined benefit interests is, or should be, notorious as is the fact that the effects of splitting orders on those interests are fund-specific” (paragraph 32).

The matter was remitted for re-hearing.

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This article was written by Natalie Cambrell, Partner, Damian Tarulli, Special Counsel and Sanela Osmanovic, Associate.