Budget Measure - Your Future, Your Super
Treasury provided a high-level overview of the four main elements in the package. There will be public consultation on draft legislation. Commencement on the reforms is set for 1 July 2021.
- Your superannuation follows you (stapling) to prevent the creation of unintended multiple superannuation accounts. Employee choice remains. If choice is not exercised, employers will use existing employee fund information available through the ATO. The employer default fund will apply only where the employee does not have a super account.
- Empowering members by making it easier for them to choose a well-performing product that meets your needs. ATO will design a Your Super portal which will be a simple tool for users.
- Holding funds to account for underperformance – protecting members from poor outcomes and encouraging funds to lower costs and fees to boost Australians’ retirement incomes. Australian Prudential Regulation Authority (APRA) will apply a benchmark test of performance to MySuper products from 1 July 2021 and other trustee-directed products from 1 July 2022, with an intent to expand coverage further over time.
- Increasing transparency and accountability for how superannuation funds use members’ savings. Trustees will need to demonstrate they have acted in the best financial interest of their members.
Treasury is happy to receive questions of clarification out of session.
myGovID and RAM post implementation
As part of the 2020 budget, the ATO received funding through the Government’s Digital Business Plan to continue development and expansion of Digital Identity to improve access and security for clients using digital government services.
Adoption has exceeded and doubled forecasted results on the implementation of myGovID and Relationship Authorisation Manager (RAM), driven by ease of use and working from home and requiring access to government stimulus services.
As at 1 November 2020:
- 2,370,782 myGovID app downloaded
- 1,782,489 myGovID identities created
- 1,218,925 ABNs linked to RAM
- 1,793,717 RAM authorisations for ABNs
- 30 agencies and 74 services using myGovID/RAM.
ATO continues to improve verifying your identity by expanding myGovID with additional approved documents. ATO are on track for program deliverables with the ability to update email and usernames scheduled for December 2020.
Raft of improvements planned for next calendar year including ability to update myGovID email/username, and beta trials which will allow individual users to access individual services (expanding from just business use).
The delivery of Facial Verification in myGovID during 2021 will also enable users to enrol for a more secure credential which will provide access to more services, for example Online TFN application. This is a one-to-one matching of client face against passport or licence photo repositories. It does not enable face recognition for crowd scanning or mass surveillance. ATO will leverage passport photos first.
Architecture has been built to service a range of parties. For example, it enables currently 12 million individuals using ATO Online systems to adopt myGovID. This will take time to complete, but results show it is much stronger than the legacy credential.
Early release of superannuation (ERS)
Australian Financial Complaints Authority (AFCA)
As at 1 November 2020, AFCA had 142 open cases for ERS complaints with three at determination stage. Since beginning of pandemic, 97 cases have been closed. Majority were closed at registration and referral to trustees, who were able to resolve directly with complainant.
Complaints covered:
- Delay in payment – members lodging a complaint immediately the five business days has expired as they are desperate to get that money.
- Difficulty with member identification – problems with identification, fraudulent identification. The majority of cases continue to be resolved via a telephone call to the fund or the ATO and a very small number go to a formal case.
- Payment to the wrong bank account – member payments having gone to the wrong bank account including where taxpayers have changed bank accounts.
- Less funds in super account than expected – member did not expect insurance premiums to be taken from their super account. In these cases, trustees are generally found to have acted properly and made adequate disclosures.
- Incorrect money request – for example; members filled out form incorrectly and requested $1k instead of $10k. In these cases, it is not an issue for AFCA and there is no trustee fault.
- Member had transferred their balance to another fund before application.
AFCA observes decreasing trend in complaints, aligned to industry observations. These are consistent with reductions in volume of applications and processes being embedded.
Australian Taxation Office
The ATO continues to also see a reduction in complaints and enquiries for ERS with similar topics to AFCA (aside from insurance complaints).
Australian Prudential Regulation Authority
APRA COVID-19 pandemic data collection (PDC) informs assessment of the impact of COVID-19 on the superannuation industry.
Following review of the value and benefits of data, some modifications have been made to the reporting requirements of funds.
Beyond 30 September 2020, only PDC reporting on operational resilience (monthly) and early release of superannuation payment demographics (quarterly data) will continue through to 31 January 2020.
Mercer CFA Institute Global Pension Index insights
A summary of the Mercer CFA Institute Global Pension Index report was presented by David Knox, Mercer, which shows Australia in 2020 has dropped from 3rd to 4th out of 39 systems due to the addition of Israel to the Index. Higher ranked countries, in the main, have higher contribution rates to funded pension arrangements.
There is a chapter on the impact to the pension system around the world and responses to COVID-19. This highlights methods like JobKeeper, early release of super benefits and suspending contributions in some countries.
This report highlights possible longer-term issues that include:
- lower interest rate impacts on retirees investing in risk averse assets
- pressure on government expenditure and government debt.
The full Global Pension IndexExternal Link report can be downloaded via the Mercer website.
Superannuation guarantee amnesty update
Many employers took up the amnesty to get back on track with a significant rush in the last two weeks prior to the 7 September close date. As at 30 September, the ATO had processed 98% of eligible disclosures. Many had paid in full with less than 5% utilising the payment plan option.
To avoid being disqualified from the amnesty and losing the benefits, employers must pay the outstanding Superannuation Guarantee charge or set up payment plans and adhere to the payment plan terms.
The ATO recognises it is a challenging time to pay. Direct contact is being made with those who have not made payments as agreed or set up payment arrangements to give them an opportunity to get on track.
If we cannot negotiate a payment plan or the employer refuses to engage with us in a reasonable timeframe, any unpaid quarters disclosed under the amnesty will be disqualified and the benefits of the amnesty reversed.
Law Administration Practice Statement PSLA 2019/1 Remission of additional superannuation guarantee charge is being revised to reflect the legislated restriction placed on the Commissioner to remit, except in exceptional circumstances, Part 7 penalties for quarters that were covered by the amnesty. It will issue in the coming weeks.
Analysis of employers that have applied for amnesty has not been completed. An overview of findings can be provided at the next meeting.
Superannuation environment and overview
Treasury Update
Treasury provided an update on other legislation.
Bills currently before Parliament include an SMSF Bill (which extends the number of members from 4 to 6), the More Flexible Super Bill and the Reuniting More Super Bill.
A bill to allow the ATO to transfer funds to KiwiSaver accounts is in development.
Your Superannuation, Your Choice legislation will be effective where workplace agreements are renegotiated after 1 January 2021.
APRA Update
Guidance on the sole purpose test will not be released this year given budget announcements and legislation. The guidance will be revisited at a later stage.
Updated Prudential Standard CPS 250 Insurance in Super is still scheduled for release for consultation before the end of the year and consultation will be extended into first quarter 2021.
APRA and Australian Securities Investment Commission (ASIC) are working together to finalise a joint letter to industry which will clarify areas of overlap between APRA’s Member Outcomes requirements and the new design and distribution obligations regime, which will commence in quarter 3, 2021.
APRA will be releasing its remuneration response package (Prudential Standard CPS 511 Renumeration) this month. As previously noted, we are looking to go out for consultation again and that will run for the routine 3 months.
ASIC update
Design and Distribution Obligations (DDO) guidance expected to be released in the next few weeks. It is proposed that this be followed with a joint letter from ASIC and APRA concerning DDO and member outcomes.
A round table meeting has been arranged for 25 November on internal dispute resolution guidance. Invitations have been sent. Attendance encouraged.
Portfolio holdings disclosure obligations to be deferred as previously advised in light of the fact there are no regulations made.
Upcoming releases this year about insurance in superannuation work include transparency about the work undertaken on occupational defaults and a report on the Value for Money project.
ASIC plans to release a consultation paper on remediation guidance to assess if current ASIC guidance is sufficient. Engagement by the superannuation industry encouraged.
ATO update
Data on Tranche 1 of the COVID-19 early release of superannuation program has been loaded to the website. Tranche 2 data, including an aggregate view to be uploaded in the new year.
An alert was issued to notify of arrangements for the COVID-19 early release of super program and the end of year shutdown period.
- The ATO will have call centre staff to support applications other the phone and assist with online enquiries on working days to the 31 December 2020.
- File processing on applications for funds will run up to 22 December, then on 30 December 2020 (for 23–28 December applications approved) and 5 January 2021 (for the remainder).Some files may continue to be sent in January 2021 to accommodate remediation action.
Industry sought consultation on design of Your Super portal. There will be elements that may be regulated, but where ATO can co-design, we will engage and seek industry feedback.
Forward arrangements
Reflections identified that the Superannuation Industry Stewardship Group (SISG) group adapted well to the changes in the environment through the year. The group by necessity was forced into shorter, more frequent virtual meetings to respond to COVID-19 and stimulus measure issues affecting the sector.
Interest identified shorter frequent meetings (ever 6 weeks via WebEx) for the first 6 months of the next year. Face to face meetings will resume later in the year depending on restrictions to travel and safety precautions.
The co-chairs will look to trial the use of smaller working groups in 2021 for specific topics. Possible topics include the Your Future, Your Super measure and Retirement Income Review (when further details become available). Working group outcomes to be brought back as an agenda item for SISG.
Attendees
Organisation |
Attendees |
|---|---|
ATO |
John Ford (Co-chair), Superannuation and Employer Obligations |
ATO |
Joelle Hansen (Secretariat), Superannuation and Employer Obligation |
ATO |
Kathrina Weinhonig (Secretariat), Enterprise Strategy and Design |
ATO |
Larissa Evans, Superannuation and Employer Obligations |
ATO |
Sonia Corsini, Superannuation and Employer Obligations |
Association of Super Funds of Australia |
Glen McCrea |
Australian Financial Complaints Authority |
Heather Gray |
Australian Institute of Superannuation Trustees |
Eva Scheerlinck |
Australian Prudential Regulation Authority |
Joanna Beeston |
Australian Prudential Regulation Authority |
Helen Rowell |
Australian Prudential Regulation Authority |
Suzanne Smith |
Australian Securities and Investments Commission |
Jane Ecclestons |
Australian Securities and Investments Commission |
Theresa Mills |
Business Council of Australia |
Ben Davies |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Financial Services Council |
Jane Macnamara |
Industry Super Australia |
Michael Fisher |
Law Council of Australia |
Michelle Levy |
Link Group |
Justin Sadler |
Mercer |
David Knox (Co-chair) |
SMSF Association |
John Maroney |
Super Consumers Australia |
Xavier O'Halloran |
The Tax Institute |
Phil Broderick |
Treasury |
Ben Dolman |
Treasury |
Helen Skyes |
Treasury |
Robb Preston |