Super Alert – 5 April 2019

05 April 2019

This week’s Super Alert covers the passing of the Improving Accountability and Member Outcomes Bill, the Federal Budget’s superannuation-related announcements, an ASIC report into financial advice, a death benefits case from WA and APRA’s new data collection system.

ASIC report on research into financial advice for consumers

On 28 March 2019, ASIC released report 614 ‘Financial advice: Mind the gap’ which sets out the ‘key findings of research commissioned by ASIC into consumer awareness and understanding of general and personal advice’.

According to the report:

  • “General and personal advice are not familiar concepts for consumers…the word ‘advice’ carries a risk of inflating consumers’ expectations about the relevance of the advice to their personal circumstances”;
  • “General and personal advice are not clearly distinguishable concepts for consumers…explaining general advice by contrasting it with personal advice may also improve consumer understanding”; and
  • “Advisers’ responsibilities when providing general and personal advice are unclear to consumers…when general advice consists of sales or marketing recommendations, making this clear to consumers may help them to better understand the limitations of the advice”.

Please click here to read more.

Supreme Court of Western Australia decision on death benefit distribution

On 1 April 2019, the Supreme Court of Western Australia published its decision in Gonciarz v Bienias [2019] WASC 104 which Justice Tottle described as a case that highlights the “importance of…making binding beneficiary nominations in respect of superannuation benefits”.

In this case, the Court was required to consider whether it could revoke the letters of administration for a member’s estate. This issue arose because the deceased member’s wife had been appointed administrator of the estate and the trustee had determined to pay the member’s entire death benefit to the estate. The wife sought to remove herself as administrator of the estate so that she could challenge the trustee’s decision and request that the entire death benefit be paid to her as the member’s spouse (as her fiduciary duty to the estate created a conflict).

Please click here to read more.

Superannuation measures in 2019-20 Federal Budget

On 2 April 2019, the Treasurer handed down the 2019-20 Federal Budget. The superannuation matters in the Budget included:

  • Establishing “an independent inquiry in three years to ensure the financial sector has implemented the Royal Commission’s recommendations and industry practices have changed”;
    “Relaxing restrictions…[so that] Australians aged under 67 years will be able to make voluntary contributions without meeting the work test and other age‑based rules will be streamlined”, date of effect: 1 July 2020;
  • Increasing APRA, ASIC and Federal Court funding as outlined in our Super Alert – 29 March 2019;
  • Making “permanent the current tax relief for merging superannuation funds that is due to expire on 1 July 2020”, date of effect: 1 July 2020;
  • “Simplifying reporting for superannuation funds by streamlining some administrative requirements for the calculation of exempt current pension income…[by allowing] superannuation fund trustees…to choose their preferred method of [calculation]”, date of effect: 1 July 2020;
  • Providing additional funding to the SCT “to resolve outstanding complains by 31 December 2020”; and
  • Providing funding to “identify options to support the establishment of a Superannuation Consumer Advocate”.

Please click here to read more.

APRA releases implementation plan for new data collection system

On 3 April 2019, APRA released information in relation to the rollout of its new data collection system following consultation with various entities in 2018.

All data collected by APRA will be replaced by the new system, however APRA has advised that ‘[t]he data and forms submitted into the new Data Collection Solution will not change on day one, and current reporting obligations and current reporting schedules will also not change’.

Please click here to read more.

Bill passed – Improving Accountability and Member Outcomes in Superannuation Measures No 1) Bill

On 4 April 2019, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No 1) Bill 2019 passed both Houses of Parliament and now awaits Royal Assent.

This Bill amends the SIS Act to:

  • Give APRA a directions power to cancel a MySuper product or remove an RSE licence;
  • Require trustees to hold annual member meetings;
  • Make breaches of the SIS covenants civil and criminal penalty provisions;
  • Require trustees to conduct annual outcomes assessments for MySuper and choice products;
  • Strengthen APRA’s supervision and enforcement powers when a change of ownership or control of an RSE licensee takes place;
  • Give APRA power to issue a direction to an RSE licensee where APRA has prudential concerns;
  • Refine the requirements for RSE licensees to make their portfolio holdings publicly available;
  • Provide APRA with the ability to obtain information on expenses incurred by RSE and RSE licensees in managing or operating the RSE; and
  • Allow civil and criminal penalties to be imposed where a trustee uses goods or services to influence employers to nominate the trustee’s superannuation fund as the default fund or influence employers to encourage their employees to nominate the fund as their choice of fund (no ‘treating’ of employers).

Further information is available in our Super Alert – 15 February 2019.

Please click here to read more.

Bill passed – Design and Distribution Obligations and Product Intervention Powers Bill

On 4 April 2019, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 passed both Houses of Parliament and now awaits Royal Assent.

According to the Explanatory Memorandum, the Bill amends the Corporations Act 2001 to:

  • Introduce design and distribution obligations in relation to financial products; and
  • Give ASIC product intervention powers to prevent or respond to significant consumer detriment.

The obligations generally apply to offers of financial products that require disclosure under the Corporations Act, including products which require disclosure in the form of a PDS. However, MySuper products are exempt from the new regime, and regulations are proposed so as to exclude interests in defined benefit superannuation funds.

The design obligations include a requirement to make a publicly-available ‘target market determination’. The distribution obligations include a requirement not to engage in ‘retail product distribution conduct’ in relation to a product unless a target market determination has been made. A target market determination must include a written description of the class of retail clients who comprise the target market for the product. The purpose of these requirements is to ensure that issuers design products for which an appropriate target market can be defined.

In connection, ASIC is given new powers to support its regulatory role with respect to the new obligations.

Please click here to read more.

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

Natalie Cambrell

P: +61 3 8644 3754

E: ncambrell@hwle.com.au

Damian Tarulli

P: +61 7 3169 4832

E: dtarulli@hwle.com.au

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