House of Representatives

Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019

Revised Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, the Hon Stuart Robert MP)
This memorandum takes account of amendments made by the Senate to the bill as introduced.

General outline and financial impact

Annual outcomes assessment

Schedule 1 to this Bill amends the Superannuation Industry (Supervision) Act 1993 (SIS Act) to require each trustee of a superannuation fund to promote the financial interests of the beneficiaries of the fund who hold a MySuper or choice product, and strengthen the obligations on superannuation trustees to annually assess and compare the appropriateness of such, including how each product continues to promote the financial interests of members.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.41 to 2.44.

Compliance cost impact: Low.

Authority to offer a MySuper product

Schedule 2 to this Bill amends the SIS Act to give the Australian Prudential Regulation Authority (APRA) an enhanced capacity to refuse a registerable superannuation entity (RSE) licensee a new authority to offer a MySuper product or to cancel an existing authority.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.19 to 3.22.

Compliance cost impact: Low.

Penalties for contravening covenants

Schedule 3 to this Bill amends the SIS Act to allow civil and criminal penalties to be imposed on trustees of superannuation funds and directors of corporate trustees who fail to execute their responsibilities to act in the interests of member beneficiaries, or who use their position to further their own interests to the detriment of member beneficiaries.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system. The amendments were also announced in Restoring trust in Australia's financial system on 4 February 2019 (Recommendation 3.7).

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 4, paragraphs 4.24 to 4.44.

Compliance cost impact: Low.

Approval to own or control an RSE licensee

Schedule 4 to this Bill amends the SIS Act to strengthen APRA's supervision and enforcement powers when a change of ownership or control of an RSE licensee takes place.

Date of effect: Three months after the Bill receives the Royal Assent.

Proposal announced: This measure was announced on 20 October 2015 in the Government's response to the Financial System Inquiry (FSI). This measure was also included in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 5, paragraphs 5.93 to 5.96.

Compliance cost impact: Low.

APRA directions power

Schedule 5 to this Bill amends the SIS Act to strengthen APRA's supervision and enforcement powers to include the power to issue a direction to an RSE licensee where APRA has prudential concerns.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 6, paragraphs 6.139 to 6.142.

Compliance cost impact: Low.

Portfolio holdings disclosure

Schedule 6 to this Bill amends the Corporations Act 2001 (Corporations Act) to refine the requirements for RSE licensees to make publically available their portfolio holdings.

Date of effect: This measure will apply to reporting days that occur on or after 31 December 2019

Proposal announced: This measure was announced as part of the Coalition's Policy for Superannuation in September 2013.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 7, paragraphs 7.51 to 7.54.

Compliance cost impact: Nil.

Annual members' meetings

Schedule 7 to this Bill amends the SIS Act to require RSE licensees to hold annual members' meetings (AMMs). The meetings are to discuss the key aspects of the fund and provide members with a forum to ask questions about all areas of the fund's performance and operations.

Schedule 7 also makes technical amendments to reduce unnecessary duplication; by ensuring that the regulations, which are to be made prescribing information to be included in annual members' meeting notices, can prescribe information by referring to information set out in a provision of the APRA reporting standards.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 8, paragraphs 8.52 to 8.55.

Compliance cost impact: Low to medium.

Summary of regulation impact statement - Annual members' meetings

Regulation impact on business

Impact: The amendments have a start-up cost of $8.5 million and ongoing costs of $13.7 million which result in an estimated annual compliance cost impact, averaged over 10 years, of $14.6 million.

Main points:

Legislation to require trustees of certain APRA-regulated funds to hold AMMs and to allow regulations to be made prescribing information to be provided to members.
However, trustees would retain flexibility over how AMMs are conducted including holding virtual meetings. Also, while members would be able to ask questions, and trustees would be required to answer them, there would be no formal voting on resolutions.
Three options were considered.

-
Maintain the status quo (Option 1)
-
Flexible annual members' meetings (AMMs) without voting (Option 2)
-
Physical annual members' meeting with voting (Option 3)

Treasury undertook public consultation (for 3 weeks) on draft legislation and explanatory material for Option 2.
Option 2 is the best option because it provides a formal opportunity for engaged members to question superannuation fund trustees, executives and other relevant officers, holding them to account at reasonably low cost. It also provides funds with the freedom to choose the most appropriate approach to AMMs.
Legislative amendments are required to implement Option 2.

Reporting standards

Schedule 8 to this Bill amends the Financial Services (Collection of Data) Act 2001 (FSCODA) to provide APRA with the ability to obtain information on expenses incurred by RSE and RSE licensees in managing or operating the RSE.

Date of effect: The day after the Bill receives the Royal Assent.

Proposal announced: This measure was announced in the Minister for Revenue and Financial Services' media release of 24 July 2017: Reforms to give consumers more power at the heart of a stronger superannuation system.

Financial impact: Nil.

Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 9, paragraphs 9.37 to 9.40.

Compliance cost impact: Nil.

Superannuation trustees not to incentivise employers

Schedule 9 to this Bill allow civil and criminal penalties to be imposed on the trustee of a superannuation fund who uses goods or services to influence employers to nominate the 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).

Date of effect: The measure applies to contraventions occurring from the day after Royal Assent.

Proposal announced: The amendments were announced in Restoring trust in Australia's financial system on 4 February 2019 (Recommendation 3.6).

Financial impact: Nil.

Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 10, paragraphs 10.15 to 10.34.

Compliance cost impact: Low.


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