Super Alert – 15 March 2019

This week’s Super Alert covers two recent cases, further superannuation Bills which have received Royal Assent and various updates from ASIC, APRA and the ATO.

TPD case decision

On 1 March 2019, the New South Wales Supreme Court handed down its decision in Burke v MetLife Insurance Limited [2019] NSWSC 177. The plaintiff, a former police officer, made a TPD claim on the basis that he suffered from PTSD. The relevant policy required that the plaintiff be incapacitated to such an extent that he would be unlikely ever to engage in work for which he was qualified. The insurer accepted that the plaintiff suffered from PTSD but not to the extent that prevented him from employment outside the police force.

The Court agreed that the insurer’s assessment was reasonable and that the plaintiff had not demonstrated that he was unable to work. The primary reason why the plaintiff had not pursued a new job was because he had been advised by the police force that he could not engage in secondary employment (not because of his PTSD). The plaintiff was also ordered to pay the insurer’s costs.

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Case relating to lapse of insurance cover

On 6 March 2019, the District Court of South Australia handed down its decision in The Estate of Babich v South Australian Superannuation Board [2019] SADC 25. The case concerned the lapsing of a member’s insurance cover in the fund at the end of the 60 day period following cessation of employment.

Under the rules of the fund, it was open to the trustee to extend this 60 day period in order to prevent a member’s insurance cover from lapsing. Although the member had applied for an extension, the trustee had not made such a determination. The Court set aside the trustee’s decision to reject the member’s application for a time extension. This was based on the fact that the disclosure material for the fund such as the PDS and fact sheets did not mention that insurance lapsed automatically on cessation of employment. Accordingly, the PDS and fact sheets were inaccurate and misleading because they did not provided notification of the 60 day time limit. The Court determined that the trustee’s decision was unfair in the circumstances and that the plaintiff had suffered hardship as a result of the decision.

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ATO Guidance Note for TRIS products

On 6 March 2019, the ATO released Guidance Note GN 2019/1 which “provides guidance on the changes to transition-to-retirement income streams that commenced from 1 July 2017”.

The Guidance Note provides information about the following matters:

• What has changed from 1 July 2017;
• When a TRIS is in the retirement phase;
• Whether a TRIS changes into a different kind of superannuation income stream once it is in the retirement phase;
• What happens to a TRIS when the member dies; and
• The taxation of TRIS payments.

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Further superannuation Bills receive Royal Assent

On 12 March 2019, the following Bills received Royal Assent:

• Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2019 which is now Act No. 16 of 2019;
• Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2019 which is now Act No. 10 of 2019; and
• Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2019 which is now Act No. 17 of 2019.

You can read more about the above Bills in our Super Alert – 25 February 2019 by clicking here.

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APRA Deputy Chair speech – “Opening the door to greater transparency in superannuation”

On 13 March 2019, APRA released a speech by Helen Rowell titled “Opening the door to greater transparency in superannuation” as delivered at the Conference of Major Superannuation Funds.

The key messages from Ms Rowell were that:

• “Australian’s superannuation system is sound and stable…something we shouldn’t take for granted…[however] there is much room for improvement across the industry”;
• When a broader directions power for APRA is legislated “APRA is ready to make use of its new powers: they are essential to making sure we are fully equipped to weed out underperformance wherever it may be”; and
• “trustee boards should not wait for legislative changes or other recommendations of the Royal Commission to be implemented to review and improve their practices”.

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ASIC regulatory costs reminder to industry

On 13 March 2019, ASIC issued a media release reminding financial service entities to pay their ASIC regulatory cost invoices in order to avoid any penalties. These invoices have been issued to the ASIC Regulatory Portal or via mail to the entity’s registered address. Payment of the invoices are due by 15 March 2019.

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