Super Alert – 26 April 2019

This week’s Super Alert covers the past two weeks’ of news including the superannuation Bills which have lapsed as a result of the election announcement and APRA’s release of its intended enforcement approach.

Lapsed superannuation Bills due to calling of Federal Election

On 11 April 2019, the Prime Minister called the Federal Election. Accordingly, the following superannuation Bills have now lapsed:

• Superannuation (Objective) Bill 2016;
• Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 – This Bill proposed to set a minimum number of independent directors on trustee boards;
• Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 – This bill was the SG amnesty Bill;
• Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 – This Bill proposed to make various amendments to SG laws such as providing that salary scarified amounts do not reduce an employer’s SG contributions;
• Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 – This Bill proposed to make the remaining “Protecting Your Super” insurance changes such as requiring insurance to be opt-in for members under age 25 or with low balances; and
• Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 – This Bill proposed to introduce identification numbers for directors.

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ALRC family law recommendations for superannuation

On 11 April 2019, the Australian Law Reform Commission released its report titled “Family Law for the Future – An Inquiry into the Family Law System”. The report makes a number of recommendations to the government to improve the family law system. In terms of superannuation, the report recommends that the Family Law Act 1975 (Cth) be amended to:

• “Provide a presumption that the value of superannuation assets accumulated during a relationship are to be split evenly between the parties”; and
• “Simplify the process for splitting superannuation including developing template superannuation splitting orders for commonly made superannuation splits; and when the applicant is suffering economic hardship, requiring superannuation trustees to limit the fees they charge members and their former spouse for services provided in connection with property settlement under Pt VIII to the actual cost of providing those services”.

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Federal Court decision in relation to meaning of de facto partner

On 15 April 2019, the Federal Court of Australia handed down its decision in Howard v Batistich [2019] FCA 525 which was an appeal from the SCT. The trustee had made a decision that the respondent was the de facto partner of the deceased member at the time of his death. Accordingly, the respondent was eligible to receive a lifetime pension from the fund. The SCT had upheld the trustee’s decision.

The deceased’s parents applied to the Court to overturn this decision on the basis that the respondent was not living with the deceased at the time of his death, she had only been to a few family events and the deceased had not made changes to his lifestyle to accommodate the respondent as his partner. However, there was evidence of text messages between the two making reference to spending the rest of their lives together and purchasing property. The Court agreed with the SCT’s determination that, based on the material available before it, the trustee’s decision was fair and reasonable.

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APRA’s enforcement approach 

On 16 April 2019, APRA issued a media release which sets out the “details on the future role and use of enforcement activities in achieving its prudential objectives”. APRA has provided a chart which indicates APRA’s usage of its supervisory tools (for example, imposing formal directions and licence conditions are towards the “less frequent” end of the graph).

According to APRA, it will adopt the following principles:

• “Adopting a ‘constructively tough’ appetite to enforcement and setting it out in a board-endorsed enforcement strategy document”;
• “Ensuring APRA supervisors are supported and empowered to hold institutions and individuals to account, and strengthening governance of enforcement-related decisions”;
• “Combining APRA’s enforcement, investigation and legal experts in one strengthened support team, and ensuring resources are available to support the pursuit of enforcement action where appropriate”; and
• “Strengthening cooperation on enforcement matters” with ASIC.

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ASIC’s warning about “Protecting Your Super” disclosure to members

On 17 April 2019, ASIC issued a media release warning trustees about the “Protecting Your Super” changes and the communications required to be made to members. ASIC reiterated that:

• “Any information provided to members in implementing the changes [must be] balanced and factual, not misleading”;
• “It is not appropriate for trustees to encourage all members to maintain insurance – many members with inactive accounts will be better off allowing the insurance to lapse. Similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members”; and
• “ASIC may take action in relation to trustees’ communications…where trustees break the law through misleading communications”.

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